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tv   Bloomberg West  Bloomberg  December 23, 2014 11:00pm-12:01am EST

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>> from pier 3 in san francisco, welcome to "bloomberg west," where we cover innovation, technology and the future of business. i am cory johnson. here's a check of your bloomberg top headlines. a milestone day for the dow jones industrial average topping 18,000 for the first time. it closed with a gain of 4/10 of a percent and up 8.7% for the year thus far. michael reagan on the outlook for next year. >> we will still have earnings growth forecast for about 6%. the big question is this expansion valuation. the s&p is trading at about 18.5 times reported earnings.
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>> news of the u.s. economy grew a 5% clip in the fourth quarter helped fuel those gains in the dow and the best gdp rating since 2003. move over new york, florida has become the nation's third-most populist state. they have 19.9 million residents. california has the most over 38 million people. that is according to the census bureau and that boosted florida's housing market. qualcomm could be facing a huge loss of revenue in china. the chinese government is pushing them to accept lower royalty payments from chinese smartphone makers for those using qualcomm technology. negotiations are ongoing. china would end its anti-monopoly investigation of the company.
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the alibaba group has removed 90 million listings for counterfeit goods before the september ipo. they spent more than 160 million dollars to block counterfeit items and improve consumer protection. it is considered to be one of the top risks and perhaps a big business for alibaba. the announced a $260 million market cap. now to the lead -- "the interview," the movie that prompted the massive hack attack against sony will be seen in theaters after all. sony has changed its mind and will have a limited release on christmas. the comedy about journalists hired to kill kim jong-un was pulled after a wide release was planned, but then hackers allegedly tied to north korea threatened violence against the theaters that were to screen it. president obama said sony made a mistake in pulling the film and is among those applauding the decision. the white house released a statement saying "the decision made by sony and participating theaters may people to make their own choices about the film and we welcome that." we also welcome los angeles reporter chris palmeri. this is quite a reversal from sony.
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>> whenever you have the republican national committee and president obama saying this movie should come out, it seems like sony had to listen. they came out and they say they are delighted. people might see this and they might recoup some of the $80 million to market this film. >> what about george clooney? is the -- we know george clooney was trying to submit a petition around hollywood that nobody would sign protesting this decision. i wonder if the reaction of the
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powerbrokers of hollywood was really the big issue to push sony over the edge here. >> it is not clear. we have not heard much from sony about the decision. there was a huge outpouring of people. michael moore said he would play it on christmas and his theater in michigan. very little support outside of north korea for saying do not run this movie. it seems like sony made a decision that is very popular at this point. >> the value of the marketing for this film -- i cannot imagine how much free publicity they have gotten for this. they will see the benefit of that with such a small release here. >> i tried to add up the theaters -- i did not get up to 100. it is unlikely they will get to the 3000 screens they would do in a wide release. they are not going to get all of their money back. they are considering some kind of pay-per-view situation. how many people crowd the theaters on christmas day or buy it online later -- we will have to wait and see.
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>> technologically, is the advancement in film this region make it more possible for theaters who did not sign up for this months ago to get copies of the film in a sort -- in a short timeframe? >> absolutely. sony was saying they needed it here by 3:00 this afternoon pacific time for a theater that wanted it. there is a little delay. they could turn around and then in two days have a movie playing in theaters -- they wouldn't have been possible over the old -- >> i suspect a lot of people will go see it to give a middle finger to the censorship that is not happening. thank you very much. north korea's internet connection went dark yesterday and briefly today. i started asking him how unusual this north korean internet outage is.
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>> we have seen this before when countries have cut off their own internet connections. egypt was a notable example. the denial of service attacks are pretty commonplace. anybody can launch them. it is a question of picking a target and the timing. the timing of this -- if these were independent hackers -- it is pretty fortunate for them. they received a big splash and they were quite effective. if nothing else, it points out to the fragility of north korea's external internet. north korea has a lot of activity -- hacking activity from outside the borders and we have not heard from those networks.
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>> perhaps the news of this breaking is not a sign of connecting the dots from the president's comments to the shutdown of the internet of north korea. >> at the very least, the activists we have been speaking with say they were inspired by the president's comments and the patriotic, nationalistic impulse to strike back. the government really did not need to do much more than kind of what it did to inspire folks to do this kind of thing. whether there was a wink and a nod, we may never know. the statement was made an north korea's defenses were hit hard. >> good stuff. jordan robinson has been covering this. thank you for talking about that. let's look at how the internet is set up in north korea and how common it is for it to go down. the group that found that out it was down first joins me now. you guys sort of broke the story and discovered the extent to which the internet was down. how unusual is it for north korea's crummy internet
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connection to go down for this extended time? >> thanks for having me on the show. well, for countries like north korea were the only have a single connection out -- there are other countries on this boat besides north korea like pakistan or cuba or syria -- then it's not -- any time an isp has some difficulty or an outage, the country is off-line.
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there has been national outages in north korea over the last couple of years. generally, they have been fairly brief and probably not that noteworthy. it just means that one provider, if they are off-line, the whole thing is off-line. as your previous segment discussed, it is a very small internet in north korea. >> you mentioned in your work there are four networks in north korea. you said there is one line out. can you explain how that works? >> the networks are referred to bgp, border gateway protocols. we use that for the work in internet performance. there are four routes. each is a range of continuous isp addresses. each computer if it is on the internet and communicating, it has some sort of ip address. >> there are 1024 ip addresses and all of north korea. i think i have more than that in this room. >> i bet you do. the internet of the united states which is the biggest has a little under one billion unique ip addresses. i had a discussion with a news
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organization from japan this morning -- 167 million ip addresses represent the internet of japan. it is 1000 -- a little over 100 million for south korea. this is a microscopic network. this internet did not play a big role in society in north korea. very few people have access to it. a handful of websites, mostly government websites. it has nearly nobody out of the many people in north korea, almost nobody has access to it. >> let me ask you this. what would it take to launch this kind of attack on the country of north korea? >> just to be clear, i don't have direct evidence to confirm that this was a cyber attack. i cannot rule out the possibility that this was an extraordinarily poorly timed router malfunction.
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however, in the context of what this occurred in, you have to consider the possibility. pursuing that possibility, this denial attack that was directed at north korea, that type of attack on the spectrum of sophistication is actually pretty low. that means there is a lot of players out there that could be involved. >> it could have been the cat that is over your right shoulder that could've launched a this attack? >> that's right. >> thank you very much for joining us. a trade-off for facebook. will it about his censorship in order to find its next billion users? that is a tough question facebook is grappling with right now in russia. you can always watch us streaming on your tablet, apple tv, amazon fire tv, but not if
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you are in north korea apparently. ♪
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>> this is "bloomberg west." facebook is bowing to censorship pressure in russia. the company agreed to block a page that promotes the rally of opposition leader at the request of russia's official communications regulator. it is trying to block pages on facebook and twitter. this comes as russian president vladimir putin tightened law and internet freedom but what is it say about facebook's ability to grow its user base in russia? joining us is david kirkpatrick. he is the author of the facebook effect. this seems to be like an existential crisis for facebook. what is facebook in the face of this russian power?
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>> that is overstating the case. this is not an existential crisis. this is getting more publicity than any of the request they get. they made this statement
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historically over and over again that they will obey the laws in which they operate. sometimes they disregard that like in the beginning of the arab spring in tunisia. you know, they are in a very hard position when the government officially asks them to take down a site. in this case, it is not that clear because apparently there are a number of other pages on facebook that have the same passage, some of whom have more people following them that facebook is not taken down. it may be because they were not asked to take those down. maybe the government is not aware they exist. i saw one thing that maybe they received the request over the weekend and a more junior facebook person acted too quickly in taking this down. i don't think they are really jeopardizing their business in russia by taking this action, but the reality is they have a very difficult line to walk when they are asked to buy a government. >> maybe the word crisis was a little strong.
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to me, this is a question of the business. it was one thing when they were at 100 million users and growing at a 50% clip but now they are at a pace where they are growing sequentially at like 2%. they are faced with this issue of what they want to be and how big do they want to be in that. how does mark zuckerberg think about this issue confronting oppressive regimes that want to have silence of people on facebook? >> in the end, mark zuckerberg in the company once think about the users first. this is not a simple question because, if you think about it, their growth has slowed but it is also has a gigantic number. they want to grow in literally every country. if they did not bow to a request like this in russia and they want to grow in countries like turkey and china -- plenty of countries that like to put in repressive laws, the governments could really make life extremely difficult for them in those countries where they have not yet got as many users. then they would argue to themselves -- that would hurt those potential users and those countries. they are truly a global service and every time they take an action they have to effectively think of it in a global context.
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that makes it extremely complicated. >> it is a hard way to take a moral stance. >> they do take moral stances but probably the fact of the other pages that also promote the same demonstration have not come down indicates they are not eager to suppress that. if they were to refuse to act on a specific request by the government, they would be in trouble in russia and that might cause it to shut down. >> david kirkpatrick, thank you as always. up next, we go on the field with russell wilson to talk about his relationship to microsoft and how technology may help him become the owner of an nfl franchise. ♪
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>> i am cory johnson. the nfl will announce its annual list of pro ballplayers tonight. seattle seahawks quarterback russell wilson hoping to make that list for a second year. off the field, the super bowl winner once to leverage his endorsements with companies like microsoft into buying his own team. we caught up with him in seattle and talk to him about the microsoft surface on the sidelines. i started about asking him what else you want to see tablets do in the future. >> i think to be able to continue to be able to sort things out process things faster. i know microsoft has more and more things to do and i want to talk to them about that this off-season. that will be kind of cool. >> what kind of things because the league controls it, too? >> just be able to hit all the
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third downs. when we watch film, that is one of the things i'm able to do throughout the week. look at all the third downs, all the red zone plays, all the scramble play, all the pressure plays. >> you are working with them over the off-season, you are already thinking about that stuff? >> i think about how i can help microsoft and the process on the sidelines. new technology will continue to develop and it is great that microsoft is innovative to do it. >> how do you decide what companies even beyond microsoft to work with in terms of endorsements? >> i try to be genuine with what works for me. i use the surface all the time. i used to be an apple guy. for me, when i first met with microsoft, i didn't know if this was going to work. and then they gave me the
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surface ii. ever since, i have started to get myself involved in that, especially when the surface iii came out. it really changed the game for me. i use that every time we have a meeting. i can sort my notes and in the right way if coach carroll's talking, if the court nader's are talking, my quarterback coach, all those things are organized the right way. also, my family is on the east coast. i get to skype all the time with my mom and my sister and also my brother. he has a little daughter. to be able to talk to them is really something special for me. >> what about the stuff beyond the microsoft stuff, making decisions, how do you sort through that stuff? you must be inundated. >> i get great opportunities. that's a blessing. i think for me, i just try to be genuine and be selective. i am very selective about which company i want to be involved with.
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i believe in having a championship mindset and that is not just on the field but also in business as well. want to own a team one day. the people i want to associate with are those that can further that. >> impressive. coming up, how is 2014 the ultimate disruption for telecom businesses? what is ahead for tv providers like comcast, directv and more. that is next on "bloomberg west." ♪ >> time now for bloomberg television on the markets. milestone today for u.s. stocks. the dow and s&p both reached records. the dow reaching 18,000 for the first time ever. energy stocks helping lead the gains. the gdp for the fourth quarter rose up to a 5% annual take since 2003.
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>> you are watching "bloomberg west." "the interview," the sony film that prompted the hacking of sony pictures, will go on limited release on christmas. small theaters are among those that will be showing the film. sony pulled the film after threats from hackers. one of the most controversial deals in cable, the purchase of comcast. the fcc was flooded with comments to reject the deal. time warner cable just submitted 31,000 additional documents that commissioners need to review. can these tv providers compete in the year ahead and what is the role of telecom in all of this? joining me now is the cofounder and partner of the first venture capitalists fund focused entirely on telecom.
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i feel like this year in telecom has been very interesting as well as the year in sort of cable and satellite broadcasting. >> one of the more exciting entrance from it of years. >> what stands out for you the most?
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>> the convergence of telecom and media industries coming together is probably the most significant thing. these trends are verified by the two big deals that are on the table, one of which you just mentioned, and the other that i don't want to talk about because i am on the board. i think it is an inevitable trend. we need more connectivity, a lot more content. that is what is going to happen in 2015, as well as the continued explosion in mobile.
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tv everywhere, where people can get their content. initial examples of some of the streaming trends, directv just announced a streaming service for $8 a month for the hispanic community a couple of weeks ago. >> isn't that just a deal of different distribution networks and not content itself? >> i think it's more about a carrier like at&t reacting to some significant customer demands for more video. they are quoted as having said one of the directv mergers closes, they will have 70 million broadband homes covered and 300 million customers with mobile --
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>> again, isn't that about the pipes on the way people get stuff and not the stuff they get? >> no, it is a combination of both. the stuff you add is the content you get as opposed to the boring old pipes. the pipes need to get a lot faster. there needs to be more of them and there are different kinds of media. a great example to prove that point is the $45 billion to $50 billion that carriers just spent on new spectrum auctions for the aws spectrum in new york over the last 30 days. they have got to have more capacity to handle these new forms of content.
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>> you think all the carriers or all the people who got the pipes are buying more spectrum to have more pipes are going to want to own the content itself or own a company that has the deals to get that content? >> i think eventually they do have to embark on a plan to own content. one of the biggest problems in the industry today is the content companies have a veritable monopoly position, at least in many sectors.
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>> what do you mean? when i think about the movie theaters, they don't have a monopoly at all. content -- they can take it to netflix or time warner or showtime. >> you look at these companies -- for example, fox is off the air with additional right now. this is the example of a fight between one of the -- off the air with dish right now. this is it the exact love a fight between one of them. they are trained to raise their prices as they can. some of the deals we are talking about are efforts by the television studios to negotiate better deals with content providers. that said, there is a whole new
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bevy of content companies that will start making their presence be felt in the marketplace and that will -- >> sort of internet-only video and so on? >> yes. >> twitch is interesting. it is the videogame service that is seeing more views where the users are creating the videos and playing the video games. >> yes. that is a new form of content. youtube is experimenting with new techniques for the creation of content in which the group of people that design youtube content self police it and self evaluate it. and their customers give them feedback and users as well. so there is a lot of very new ways this content will be delivered to the marketplace. >> what do you make of the resuscitation of t-mobile? he has done on amazing job at taking a third-rate carrier and come up with innovative ways to offer cheap phones and contracts and grow the business for quite a long time. >> he is a great example of the paths that some of these traditional carriers need to follow in order to become leaders in the next 10 years in the marketplace. i think he has been dynamic. he has taken advantage of the fcc's desire to not have the u.s. industry consolidate down to three, to remain with four mobile carriers. >> this morning, i saw an analyst note that says we think it makes sense for t-mobile to get together with sprint. the fcc has made it clear they won't let that happen. do you think that t-mobile can really get to a significant market share given its limited spectrum right now? >> i think it is going to be a challenge. spectrum has been known to change hands. one wild card in this whole thing is charlie ergen who a lot of people say did the best job at participating in the auctions.
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he's got a decision to make. he's done a great job at building up asset value in spectrum. now we've got to move to the monetization issue and that is key to his future success. >> appreciate having your insights. silicon valley getting real with virtual reality. what will the next year hold for vr technology? we will talk about that next. ♪
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>> this is bloomberg west. >> "the interview," the sony picture, will be in films after all. seth rogen tweeted "freedom has prevailed." it'll be shown at theaters willing to play it on christmas day. there he is drinking from the family cup. the publicity of this film could not be bought. sony willing to put this movie out there in a limited release. we will see how limited that is. that is one reality. virtual reality is still all the buzz in silicon valley. earlier this year, facebook bought oculus rift.
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\samsung released its own headset. there is this thing from dodo case made of cardboard and works with your iphone 5 with some custom apps. it is actually really cool. but, what is it going to be? is it going to be cardboard? will it be oculus rift? mike waterhouse joins us. how'd you make sense of this virtual reality thing? i've got to tell you. i just got these things in my hands today. it is actually really cool. >> i got one, too. they are pretty cool. this is actually being used --
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hey, you look pretty good, cory. by the way, happy holidays. >> anything that covers my face. >> i usually put it under my chin. what is amazing about the one i got is it is being used to demonstrate advertising technology. these things are taking off. a ton of money to be made down the road. there is a lot of money coming down the road from the venture capitalists. rothenberg started their own fund with mentors. there is a myriad of applications. this will be a very broad platform and it's not going to be entirely expensive and it won't only be big goggles. you talk about samsung with the telephone, with the cell phone. so this is here to stay now and now there are scores of companies starting to produce applications, new accessories. this will be a big ecosystem.
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>> i heard the same thing about 3-d televisions about three or four years ago at cef. that didn't happen. >> yeah. i think the 3-d television problem was consumers got normal high-def television for their day-to-day viewing. that was fine. 3-d will be much more about things where you really need to reach in and take control and use it. so training for doctors, training for students, immersive teaching, designing bridges, putting your house up on the web in a virtual reality environment with low-price goggles. i don't think this will be about watching "scandal." >> i think the entertainment thing is overhyped here in hollywood where i am sure there is some interest and there's talk about developing entertainment.
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but the process of using these virtual things, it's kind of exhausting on the eyes and to the mind. i can't imagine sitting for 90 minutes with this sort of very immersive experience. it is a lot more tiring than in a theater or watching film or something. >> yeah, if you have to hold it up to your face, it is a little tiring. the oculus has getting better and better. i didn't even notice it was on my head by the end.
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but, i was also sitting down. there is this company that has come out with a virtual reality treadmill. there is a lot of different possibilities of what will make good formfactor for different use cases. i don't think you will see one device. you will see a lot of different devices for different use cases. >> among the possibilities that are not virtual but real -- how about flying a balloon over mount everest? or playing football with joe montana? there is one start-up that is making that possible and it's called if only. if only has a unique holiday giftgiving experience that also benefits charities. that story is next on "bloomberg west." ♪
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>> this is "bloomberg west." i'm cory johnson. you need a last-minute christmas gift? if only offers some holiday specials. they are unusual gifts. skiing with olympic athletes and a cooking show. i spoke with the founder and ceo and started by asking what makes selling experiences a unique business model. >> delivering experiences and selling experiences is a surprisingly complex business. we reverse engineered the amazon platform for sending things and applied it to experiences. blackout dates, sometimes in person things require a background check, different tax implications. and our platform delivers it all. >> are those things that are one-off hurdles, background checks, travel, whatever, are those replicable so it becomes a model and not just an individual hassle?
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>> there are some things that can be done at scale and some that can't. we work with fans where we sell hundreds of meet and greets but maybe only one private concert. >> the model is different, too, just making profit for example. >> the if only model is very modern. every single transaction benefits a charity or cause. we support over 300 charities. some of them get hundreds of thousands of dollars from us. >> already? >> oh, yes.
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>> talk about launching this business. was there any particular inspiration? >> i had sold my last company and i was thinking what is the coolest idea i can come up with? my brother loves tennis and i had gotten him an hour of tennis with john mcenroe. i thought, what if there was a place you can go and get these expenses regularly? everyone has their own if only so why not call it if only? >> fancy people who live on the edges of the country and know people with influences can run into these kind of opportunities and most of the world can't. is that part of the idea here, that the markets can't be determined by what we see the market today? >> i think about how i can provide an incredible experience in on every budget? >> if you have the money to have michael cirillo cook at your house, we can arrange it. but for $40, we can give you a unique recipe and the ingredients and that is something you could never get on your own. it is possible to give people at every budget an experience. >> he is a friend of the program. i wonder, when you look across these things, how much scale is there? there is only one of him and there are lots of great chefs, but is there some way you can pass on a level of profits or interest in the people that participate in these things?
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>> they are once-in-a-lifetime things. right now, you can go ballooning over mount everest. you and your friend will have to spend around $5 million to do it. however, if you want front row seats to a great concert, the best seats, that may be only a couple hundred dollars and we can sell many of them. we get tickets directly from the artists. we can do those things all day long. >> when you look at the technology, technology today is so very different.
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i wonder what technologically makes this a 2014 product, not a 1999 product? >> our vision is actually that our technology platform, the if only platform, will connect all people of achievement, all amazing people directly to their fans and their audience. and it's the platform that does that, right? there is something like 30 different types of transactions we facilitate. by the way, we can raffle something. we can auction it, either live auction or sealed bid. we can buy it now or group but it and the platform is smart. to do all that and have blackout dates and all the other variables, where we can ship it or not -- >> what is it that is technologically for now? >> i think part of it is the speed at which you can build things these days. we built the entire platform from scratch ourselves. the other part is we work with
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celebrities and luminaries. so having things like iphone apps and whatever have allowed us to get information to them quickly so they can say, sure, i'll do this, no, i won't, or i will do it if and these are the dates. and we pass those directly to our luminaries. >> that was trevor trena. i have no idea what this is. it's nice out. >> it is very nice. >> what is the bite? -- byte? >> 200,000, that is how much it costs to rent out at&t park for a party. facebook had their holiday party at at&t park. that is where they had their employees pose with the world series trophy and the mascot lucile. they had all of these gigantic hanging baseball lights. >> did they have batting practice? >> i have heard of parties doing that. >> that's a good thing to do.
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more "bloomberg west" in a few days. happy holidays. ♪
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>> the following is a paid program. the opinions expressed do not revive those of bloomberg lp, its affiliates, or its employees. the following is a paid advertisement from star vista and time life. bobby darin. rank sinatra. dane martin -- dean martin. tony bennett. nat king cole. johnny mathis.

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